Andrew Peller Limited Reports Solid Growth in Third Quarter and First Nine Months of Fiscal 2013

Andrew Peller Limited Reports Solid Growth in Third Quarter and First Nine 
Months of Fiscal 2013 
GRIMSBY, ONTARIO -- (Marketwire) -- 02/11/13 --  
This news release contains forward-looking information that is based
upon assumptions and is subject to risks and uncertainties as
indicated in the cautionary note contained elsewhere in this news
release. 
Andrew Peller Limited (TSX:ADW.A)(TSX:ADW.B) (the "Company")
announced today continued strong operating and financial performance
for the three and nine months ended December 31, 2012.  
FISCAL 2013 HIGHLIGHTS: 


 
--  Sales up 4.4% on solid growth through majority of trade channels 
--  Sales have increased in 41 of the last 43 quarters 
--  Net earnings up 14.9% to $15.6 million or $1.12 per Class A Share 
--  Launch of new brands to contribute to further organic growth 
--  Peller Estates remains top-selling wine brand across Canada 
--  Export sales bolstered by new business with Sunwing Vacations and
    prestigious international awards for ice wine 

 
"The third quarter remains our strongest period of the year due to
seasonal sales and we were very pleased to generate a solid 4.2%
predominantly organic growth in sales for the quarter compared to
last year," commented John Peller, President and CEO. "We expect to
see another record year of growth and profitability for the 2013
fiscal year and continued strong performance going forward." 
Sales for the third quarter of fiscal 2013 rose 4.2% to $79.8 million
from $76.6 million in the prior year. For the nine months ended
December 31, 2012 sales increased 4.4% to $225.6 million from $216.0
million last year. For the nine-month period, the increases in
revenues are due primarily to the contribution from the licensing
agreement with the Wayne Gretzky winery effective November 8, 2011,
the acquisition of Cellar Craft that was effective October 28, 2011
as well as solid organic growth arising from new product
introductions, particularly skinnygrape, increased sales of premium
blended and varietal table wine brands sold through provincial liquor
boards, growth in sales at the Company's retail store network, and
strong export sales.  
Gross margin was 38.6% of sales in the third quarter and for the
first nine months of fiscal 2013 compared to 40.1% 
and 39.5%
respectively in the same periods last year. Gross margin percentage
was negatively affected by higher costs for wine purchased on
international markets in fiscal 2013 as well as increased price
competition in certain markets. The decrease in gross margin
percentage was partially offset by the positive impact of sales of
higher margin products and successful cost control initiatives to
reduce distribution, operating, and packaging expenses. During fiscal
2013 the Company implemented programs to enhance a number of supply
chain and distribution contracts that it expects will contribute to
improved profitability over the long term. The special levy
implemented by the Ontario government on July 1, 2010 served to
reduce sales and gross margin by approximately $1.5 million and $1.9
million in the first nine months of fiscal 2013 and fiscal 2012
respectively. 
Selling and administrative expenses increased in the third quarter
and first nine months of fiscal 2013 due to an increase in
advertising and promotional initiatives across all trade channels and
an increase in consulting expenses incurred to implement cost control
and information technology initiatives. As a percentage of sales,
selling and administrative expenses for the nine months ended
December 31, 2012 were 25.1%, down marginally from 25.5% in the prior
year. 
Interest expense has declined in fiscal 2013 compared to the prior
year due to a decrease in short and long-term interest rates
partially offset by higher debt levels.  
The Company recorded a non-cash gain in the first nine months of
fiscal 2013 related to mark-to-market adjustments on an interest rate
swap and foreign exchange contracts aggregating approximately $1.1
million compared to a loss of $0.3 million in the prior year. The
Company has elected not to apply hedge accounting and accordingly
these financial instruments are reflected in the Company's financial
statements at fair value each reporting period. These instruments are
considered to be effective economic hedges and have enabled
management to mitigate the volatility of changing costs and interest
rates. 
Other income received in fiscal 2013 related to $0.5 million recorded
upon expropriation of a small part of the property that surrounds the
Company's Port Moody facility. The property is being temporarily used
while construction of a rapid transit project takes place. Payments
amounting to $2.0 million for the use of the property were received
in advance and were recorded as deferred income. The amount received
is being reported as other income over the five-year term of the
expropriation, which started on July 1, 2012. Other expenses in
fiscal 2013 include a $0.3 million fair value adjustment to vines.
Other expenses in fiscal 2012 included a $0.6 million fair value
adjustment to vines and $0.1 million in maintenance costs for the
Company's Port Moody facility.  
Net earnings excluding gains (losses) on derivative financial
instruments, other expenses, and the related income tax effect of
these items for the three and nine months ended December 31, 2012
were $6.3 million and $14.7 million, respectively compared to $6.3
million and $14.3 million in the same periods last year. Net earnings
for the third quarter of fiscal 2013 were $6.6 million or $0.47 per
Class A Share compared to $6.3 million or $0.46 per Class A Share in
the prior year. For the nine months ended December 31, 2012 net
earnings were $15.6 million or $1.12 per Class A Share compared to
$13.6 million or $0.98 per Class A Share last year. The third quarter
of the Company's fiscal year is historically the strongest due to
seasonal sales during the period. 
Strong Financial Position 
Working capital at December 31, 2012 increased to $45.0 million
compared to $34.9 million at March 31, 2012. The change related to a
larger harvest of grapes due to warmer summer temperatures, higher
accounts receivable due to the seasonality of sales, and a reduction
in accounts payable and accrued charges. These amounts were partially
offset by an increase in bank indebtedness. The Company's debt to
equity ratio was 0.85:1 at December 31, 2012 compared to 0.87:1 at
March 31, 2012. Shareholders' equity as at December 31, 2012 was
$131.0 million or $9.16 per common share compared to $120.6 million
or $8.43 per common share as at March 31, 2012. The increase in
shareholders' equity is primarily due to higher net earnings for the
year partially offset by the payment of dividends. 
In the first nine months of fiscal 2013 the Company generated cash
from operating activities, after changes in non-cash working capital
items, of $6.7 million compared to $0.7 million in the prior year.
Cash flow from operating activities has increased in fiscal 2013 due
to strong earnings performance, the advance payments received for the
use of the Port Moody property, lower income tax installments and a
smaller increase in working capital than in the prior year.  
Recent Events 
The Company is pleased to confirm that its popular Peller Estates
wines remained the top-selling brand in Provincial liquor stores
across Canada. In addition, the Company's Trius portfolio stands as
one of the top-three Vintner's Quality Alliance (VQA) brands in the
country, and its new Crush brand was among the top new VQA product
launches at the Liquor Control Board of Ontario (LCBO).  
The Company's strong export business will be augmented by new
revenues supplying all of Sunwing Vacations' flights to southern
holiday destinations from Canada. The Company estimates that
approximately 1.4 million glasses of Peller Estates wines will be
served on all Sunwing Vacation flights equaling approximately 284,000
bottles of wine served this season. The Canadian charter airline
operates daily flights to over 12 favourite sun destinations
including; Florida, Jamaica and Cuba. 
In addition, the Company is pleased to announce that its Peller
Estates Icewines have received a number of prestigious awards at
international competitions, including Gold at the Icewine du Monde
2012 competition and Gold at the Decanter World Wine Awards held in
London, England. Judged by a panel of over 200 wine experts including
wine merchants, sommeliers, journalists, Masters of Wine and Master
Sommeliers, Peller Estates Vidal Icewine 2010 received these awards
in competition against wines from 54 countries. In addition, at the
Japan Wine Challenge, Peller Estates Vidal Icewine 2010 was awarded
the coveted distinction of Best Sweet Wine in the competition from
more than 1,300 wines entered representing 27 countries. 
"These prestigious awards are a testament to the quality of our ice
wines, and we expect this recognition will enhance our presence both
in Canada and in our export markets around the world," Mr. Peller
stated. 
During fiscal 2013 the Company launched its new Verano wines imported
from Spain, as well as skinnygrape, Canada's first low calorie wine.
Thirty Bench's award-winning Riesling has been included in the
"Vintages Essentials Collection" at the LCBO, while the Company's Red
Rooster wines are now fully distributed and available in all British
Columbia markets. In addition, the Company is now approaching the
capability to harvest a full crop from its 300 acre vineyard that was
recently planted in BC's Okanagan Valley, increasing the Company's
VQA grape production by 50% in the Province. 
Financial Highlights (Unaudited)  
(Complete condensed consolidated financial statements to follow) 


 
----------------------------------------------------------------------------
(in $000 except as otherwise stated)       Three Months         Nine Months 
For the Period Ended December 31,        2012      2011      2012      2011 
----------------------------------------------------------------------------
Sales                                  79,813    76,595   225,557   215,992 
Gross margin                           30,812    30,719    87,141    85,304 
Gross margin (% of sales)                38.6%     40.1%     38.6%     39.5%
Selling and administrative expenses    18,942    18,861    56,697    55,159 
EBITA                                  11,870    11,858    30,444    30,145 
Unrealized (gain) loss on financial                                         
 instruments                             (683)     (117)   (1,079)      296 
Other (income) expenses                   214        44      (213)      700 
Net earnings                            6,632     6,309    15,634    13,605 
Earnings per share - Class A         $   0.47  $   0.46  $   1.12  $   0.98 
Earnings per share - Class B         $   0.42  $   0.39  $   0.98  $   0.85 
Dividend per share - Class A                                                
 (annual)                                                $  0.360  $  0.360 
Dividend per share - Class B                                                
 (annual)                                                $  0.314  $  0.314 
Cash provided by operations (after                                          
 changes in non-cash working capital                                        
 items)                                (5,067)   (9,460)    6,655       695 
Working capital                                            45,000    39,654 
Shareholders' equity per share                           $   9.16  $   8.56 
----------------------------------------------------------------------------

 
The Company calculates net earnings excluding gains (losses) on
derivative financial instruments, other expenses, and the related
income tax effect as follows: 


 
----------------------------------------------------------------------------
(Unaudited)                                   For the three    For the nine 
                                               months ended    months ended 
                                               December 31,    December 31, 
(in thousands of $)                            2012    2011    2012    2011 
----------------------------------------------------------------------------
Net earnings                                  6,632   6,309  15,634  13,605 
Net unrealized losses (gains) on derivatives   (683)   (117) (1,079)    296 
Other expenses (income)                         214      44    (213)    700 
Income tax effect of the above                  127      20     349    (269)
----------------------------------------------------------------------------
Net earnings excluding gains (losses) on                                    
 derivative financial instruments, other                                    
 expenses, and the related income tax effect  6,290   6,256  14,691  14,332 
----------------------------------------------------------------------------

 
Andrew Peller Limited ('APL' or the 'Company') is a leading producer
and marketer of quality wines in Canada. With wineries in British
Columbia, Ontario, and Nova Scotia, the Company markets wines
produced from grapes grown in Ontario's Niagara Peninsula, British
Columbia's Okanagan and Similkameen Valleys, and from vineyards
around the world. The Company's award-winning premium and
ultra-premium VQA brands include Peller Estates, Trius, Hillebrand,
Thirty Bench, Crush, Wayne Gretzky, Sandhill, Calona Vineyards Artist
Series, and Red Rooster. Complementing these premium brands are a
number of popularly priced varietal wine brands including Peller
Estates French Cross in the East, Peller Estates Proprietors Reserve
in the West, Copper Moon, XOXO, skinnygrape and Verano. Hochtaler,
Domaine D'Or, Schloss Laderheim, Royal, and Sommet are our key value
priced wine blends. The Company imports wines from major wine regions
around the world to blend with domestic wine to craft these popularly
priced and value priced wine brands. With a focus on serving the
needs of all wine consumers, the Company produces and markets premium
personal winemaking products through its wholly-owned subsidiary,
Global Vintners Inc., the recognized leader in personal winemaking
products. Global Vintners distributes products through over 250
Winexpert and Wine Kitz authorized retailers and franchisees and more
than 600 independent retailers across Canada, the United States, the
United Kingdom, New Zealand, Australia, and China. Global Vintners
award-winning premium and ultra-premium winemaking brands include
Selection, Vintners Reserve, Island Mist, Kenridge, Cheeky Monkey,
Ultimate Estate Reserve, Traditional Vintage, Cellar Craft, and
Artful Winemaker. The Company owns and operates more than 100
well-positioned independent retail locations in Ontario under The
Wine Shop, Aisle 43, and WineCountry Vintners store names. The
Company also owns Grady Wine Marketing Inc. based in Vancouver and
The Small Winemaker's Collection Inc. based in Ontario; both of these
wine agencies are importers of premium wines from around the world
and are marketing agents for these fine wines. The Company has
entered into a partnership to market the Wayne Gretzky Estate Winery
brands across Canada. The Company's products are sold predominantly
in Canada with a focus on export sales for its icewine and personal
winemaking products. Andrew Peller Limited common shares trade on the
Toronto Stock Exchange (symbols ADW.A and ADW.B). 
The Company utilizes EBITA (defined as earnings before interest,
amortization, unrealized derivative (gain) loss, other expenses, and
income taxes). EBITA is not a recognized measure under IFRS.
Management believes that EBITA is a useful supplemental measure to
net earnings, as it provides readers with an indication of cash
available for investment prior to debt service, capital expenditures,
and income taxes. Readers are cautioned that EBITA should not be
construed as an alternative to net earnings determined in accordance
with IFRS as an indicator of the Company's performance or to cash
flows from operating, investing and financing activities as a measure
of liquidity and cash flows. The Company also utilizes gross margin
(defined as sales less cost of goods sold, excluding amortization)
and net earnings excluding gains (losses) on derivative financial
instruments, other expenses, and the related income tax effect as
defined above. The Company's method of calculating EBITA, gross
margin, and net earnings excluding gains (losses) on derivative
financial instruments, other expenses, and the related income tax
effect may differ from the methods used by other companies and,
accordingly, may not be comparable to measures used by other
companies. 
Andrew Peller Limited common shares trade on the Toronto Stock
Exchange (symbols ADW.A and ADW.B). 
FORWARD-LOOKING INFORMATION 
Certain statements in this news release may contain "forward-looking
statements" within the meaning of applicable securities laws,
including the "safe harbour provision" of the Securities Act
(Ontario) with respect to Andrew Peller Limited (the "Company") and
its subsidiaries. Such statements include, but are not limited to,
statements about the growth of the business in light of the Company's
recent acquisitions; its launch of new premium wines; sales trends in
foreign markets; its supply of domestically grown grapes; and current
economic conditions. These statements are subject to certain risks,
assumptions, and uncertainties that could cause actual results to
differ materially from those included in the forward-looking
statements. The words "believe", "plan", "intend", "estimate",
"expect", or "anticipate" and similar expressions, as well as future
or conditional verbs such as "will", "should", "would", and "could"
often identify forward-looking statements. We have based these
forward-looking statements on our current views with respect to
future events and financial performance. With respect to
forward-looking statements contained in this news release, the
Company has made assumptions and applied certain factors regarding,
among other things: future grape, glass bottle, and wine prices; its
ability to obtain grapes, imported wine, glass, and its ability to
obtain other raw materials; fluctuations in the U.S./Canadian dollar
exchange rates; its ability to market products successfully to its
anticipated customers; the trade balance within the domestic Canadian
wine market; market trends; reliance on key personnel; protection of
its intellectual property rights; the economic environment; the
regulatory requirements regarding producing, marketing, advertising,
and labeling its products; the regulation of liquor distribution and
retailing in Ontario; and the impact of increasing competition.  
These forward-looking statements are also subject to the risks and
uncertainties discussed in this news release, in the "Risk Factors"
section and elsewhere in the Company's MD&A and other risks detailed
from time to time in the publicly filed disclosure documents of
Andrew Peller Limited which are available at www.sedar.com.
Forward-looking statements are not guarantees of future performance
and involve risks, uncertainties, and assumptions which could cause
actual results to differ materially from those conclusions,
forecasts, or projections anticipated in these forward-looking
statements. Because of these risks, uncertainties and assumptions,
you should not place undue reliance on these forward-looking
statements. The Company's forward-looking statements are made only as
of the date of this news release, and except as required by
applicable law, the Company undertakes no obligation to update or
revise these forward-looking statements to reflect new information,
future events or circumstances or otherwise.  


 
ANDREW PELLER LIMITED                                                       
Condensed Consolidated Balance Sheets                                       
Unaudited                                                                   
These financial statements have not been reviewed by our auditors           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                   December 31      March 31
                                                          2012          2012
(in thousands of Canadian dollars)                           $             $
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
                                                                            
Current Assets                                                              
Accounts receivable                                     26,882        24,937
Inventory                                              114,694       110,256
Current portion of biological assets                         -           881
Prepaid expenses and other assets                        3,073         1,338
                                                ----------------------------
                                                       144,649       137,412
Property, plant, and equipment                          89,013        84,490
Biological assets                                       12,924        12,556
Intangibles                                             12,801        13,621
Goodwill                                                37,473        37,473
                                                ----------------------------
                                                       296,860       285,552
                                                ----------------------------
                                                ----------------------------
                                                                            
                                                                            
Liabilities                                                                 
                                                                            
Current Liabilities                                                         
Bank indebtedness                                       62,284        57,495
Accounts payable and accrued liabilities                26,723        37,118
Dividends payable                                        1,252         1,252
Income taxes payable                                     1,928            40
Current portion of derivative financial                                     
 instruments                                             1,150         1,272
Current portion of long-term debt                        6,312         5,366
                                                ----------------------------
                                                        99,649       102,543
                                                                            
Long-term debt                                          42,791        41,456
Long-term derivative financial instruments               1,297         1,943
Post-employment benefit obligations                      8,119         7,151
Deferred income                                          1,415             -
Deferred income taxes                                   12,597        11,907
                                                ----------------------------
                                                       165,868       165,000
                                                ----------------------------
                                                                            
Shareholders' Equity                                                        
                                                                            
Capital stock                                            7,026         7,026
Retained earnings                                      123,966       113,526
                                                ----------------------------
                                                       130,992       120,552
                                                ----------------------------
                                                                            
                                                       296,860       285,552
                                                ----------------------------
                                                ----------------------------

 
The above statements should be read in conjunction with the entire
interim consolidated financial statements and notes.  
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.    


 
ANDREW PELLER LIMITED                                                       
Condensed Consolidated Statements of Earnings                               
Unaudited                                                                   
These financial statements have not been reviewed by our auditors           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                  For the three months   For the nine months
                                                 ended                 ended
                                           December 31           December 31
(in thousands of Canadian              2012       2011       2012       2011
 dollars)                                 $          $          $          $
----------------------------------------------------------------------------
                                                                            
Sales                                79,813     76,595    225,557    215,992
Cost of goods sold                   49,001     45,876    138,416    130,688
Amortization of plant and                                                   
 equipment used in production         1,180      1,233      3,527      3,677
                                 -------------------------------------------
Gross profit                         29,632     29,486     83,614     81,627
Selling and administration           18,942     18,861     56,697     55,159
Amortization of plant, equipment,                                           
 and intangibles used in selling                                            
 and administration                     646        688      2,426      2,119
Interest                              1,288      1,170      3,866      4,201
                                 -------------------------------------------
Operating earnings                    8,756      8,767     20,625     20,148
Net unrealized (gains) losses on                                            
 derivative financial instruments      (683)      (117)    (1,079)       296
Other (income) expenses                 214         44       (213)       700
                                 -------------------------------------------
Earnings before income taxes          9,225      8,840     21,917     19,152
                                 -------------------------------------------
Provision for income taxes                                                  
Current                               2,140      1,879      5,089      4,706
Deferred                                453        652      1,194        841
                                 -------------------------------------------
                                      2,593      2,531      6,283      5,547
                                 -------------------------------------------
                                                                            
Net earnings for the period           6,632      6,309     15,634     13,605
                                                                            
                                                                            
Net earnings per share                                                      
Basic and diluted                                                           
  Class A shares                       0.47       0.46       1.12       0.98
                                 -------------------------------------------
                                 -------------------------------------------
  Class B shares                       0.42       0.39       0.98       0.85
                                 -------------------------------------------
                                 -------------------------------------------

 
The above statements should be read in conjunction with the entire
interim consolidated financial statements and notes. 
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.  


 
ANDREW PELLER LIMITED                                                       
Condensed Consolidated Statements of Comprehensive Income                   
Unaudited                                                                   
These financial statements have not been reviewed by our auditors           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                              For the three    For the nine 
                                               months ended    months ended 
                                                December 31     December 31 
                                                2012   2011    2012    2011 
(in thousands of Canadian dollars)                 $      $       $       $ 
----------------------------------------------------------------------------
                                                                            
Net earnings for the period                    6,632  6,309  15,634  13,605 
                                                                            
Net actuarial losses on post-employment                                     
 benefit plans                                  (133)  (438) (1,941) (2,295)
Deferred income taxes                             34    114     504     597 
                                             -------------------------------
Other comprehensive loss for the period          (99)  (324) (1,437) (1,698)
                                             -------------------------------
                                                                            
Net comprehensive income for the period        6,533  5,985  14,197  11,907 
                                             -------------------------------
                                             -------------------------------

 
The above statements should be read in conjunction with the entire
interim consolidated financial statements and notes. 
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.  


 
ANDREW PELLER LIMITED                                                       
Condensed Consolidated Statements of Cash Flows                             
Unaudited                                                                   
These financial statements have not been reviewed by our auditors           
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                For the nine   For the nine 
                                                months ended   months ended 
                                                December 31,   December 31, 
                                                        2012           2011 
(in thousands of Canadian dollars)                         $              $ 
----------------------------------------------------------------------------
                                                                            
Cash provided by (used in)                                                  
Operating activities                                                        
Net earnings for the period                           15,634         13,605 
                                                                            
Adjustments for:                                                            
  Loss (gain) on disposal of property and                                   
   equipment                                            (547)           158 
  Amortization of plant, equipment, and                                     
   intangibles                                         5,953          5,796 
  Interest expense                                     3,866          4,201 
  Provision for income taxes                           6,283          5,547 
  Revaluation of biological assets                       295            563 
  Post-employment benefits                              (973)          (647)
  Deferred income                                      1,819              - 
  Net unrealized (gain) loss on derivative                                  
   financial instruments                              (1,079)           296 
Interest paid                                         (3,640)        (4,043)
Income taxes paid                                     (3,201)        (5,002)
                                              ------------------------------
                                                      24,410         20,474 
                                                                            
Changes in non-cash working capital items                                   
 related to operations                               (17,755)       (19,779)
                                              ------------------------------
                                                                            
                                                       6,655            695 
                                              ------------------------------
                                                                            
Investing activities                                                        
Proceeds from disposal of property and                                      
 equipment                                               514              - 
Purchase of property, equipment, and                                        
 biological assets                                   (11,266)        (5,097)
Purchases of intangibles                                   -         (1,039)
Proceeds from disposal of a business                   1,000              - 
Acquisition of businesses                                  -           (600)
                                              ------------------------------
                                                                            
                                                      (9,752)        (6,736)
                                              ------------------------------
                                                                            
Financing activities                                                        
Decrease in bank indebtedness                          4,789          9,946 
Issuance of long-term debt                             6,500         50,263 
Repayment of long-term debt                           (4,280)       (49,611)
Deferred financing costs                                (155)          (904)
Dividends paid                                        (3,757)        (3,653)
                                              ------------------------------
                                                                            
                                                       3,097          6,041 
                                              ------------------------------
                                                                            
Increase (decrease) in cash during the period              -              - 
                                                                            
Cash, beginning of period                                  -              - 
                                                                            
Cash, end of period                                        -              - 
                                              ------------------------------
                                              ------------------------------

 
The above statements should be read in conjunction with the entire
interim consolidated financial statements and notes.  
They will be available on the Investor Relations section of
www.andrewpeller.com or at www.sedar.com.
Contacts:
Andrew Peller Limited
Mr. Peter Patchet
CFO and EVP Human Resources
(905) 643-4131 Ext. 2210
peter.patchet@andrewpeller.com
www.andrewpeller.com
 
 
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